TURKEY AND GEORGIA SLOW DANCE ON GAS TO THE NEW

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 006763

SIPDIS

SIPDIS

USDOC FOR 4212/ITA/MAC/CPD/CRUSNAK
DOE FOR CHARLES WASHINGTON
EUR ALSO FOR MATT BRYZA
S/P FOR STEVE HELLMAN

E.O. 12958: DECL: 11/12/2016
TAGS: ENRG EPET PREL TU GG AJ RS
SUBJECT: TURKEY AND GEORGIA SLOW DANCE ON GAS TO THE NEW
YEAR

REF: A. ANKARA 6736

B. ANKARA 6638

C. TBILISI 3402

Classified By: DCM NANCY MCELDOWNEY FOR REASONS 1.5 (B AND D)


1. (C) SUMMARY: The full court press of President
Saakashvili's visit to Ankara aimed at securing gas for
Georgia yielded what the GOG announced as a signed MOU, but
what the GOT characterized as reiteration of its political
commitment to help Georgia with a share of its gas, while
leaving the critical issue of compensation to a trilateral
meeting. The trilateral meeting has been scheduled
tentatively for December 29 in Ankara with Energy Ministers,
but Azerbaijan is to be represented by DPM Abid Sharifov,
although his attendance and the meeting have not been
confirmed. End Summary.


2. (C) Georgia Embassy DCM Irakli Koplatadze told us that
Turkey and Georgia had indeed signed a MOU on gas on December
22 during a full day of meetings between Energy Ministers and
staff. He said that the bilateral MOU stated that Turkey
would provide 0.8 BCM from its Shah Deniz share to Georgia,
but left the vexing issue of compensation to Turkey to be
addressed at a trilateral meeting. He said that the
trilateral had been subsequently set for Friday December 29
in Ankara, with Azerbaijan to be represented by DPM Abid
Sharifov. The Georgian DCM said that Georgia had offered to
compensate Turkey with additional electricity over 5-6 years,
but agreement had not been reached.


3. (C) MFA Energy Officer Gulsun Erkul confirmed that a
document had been signed, but she characterized it as "signed
minutes," in which Turkey reiterated its political commitment
to help Georgia. She said that the Georgians were insistent
that something be signed to buttress their position with
their public. Erkul said that a full agreement could not be
signed without the Azeris and without clarifying
compensation. She repeated the Turkish request that the
contract between Turkey and the consortium be delayed six
months to July 2007 to then provide the full 12 months at the
cheaper pricing. In her view the Azeris needed to step up
and sign an acceptable agreement for the Shah Deniz gas.
Erkul confirmed the scheduled trilateral meeting for December
29, but noted that Azeri DPM Sharifov had not confirmed his
participation.


4. (C) MFA Caucasus Department Head Suleyman Gokce cited
additional areas of cooperation discussed during President
Saakashvili's December 19-21 state visit to Turkey: the
Kars-Tbilisi-Baku railroad and a signed Turkey-Georgia
Preferential Trade Agreement, with a promise to expedite
negotiations on a Free Trade Agreement. The Georgian
delegation noted the positive results of a nine-month old
preferential visa regime that allows Turkish and Georgian
citizens to enter each others' countries for 90 days without
visas, which Georgian officials said has resulted in one
fifth of all Georgian citizens visiting Turkey. However,
Gokce noted that the clear focus of President Saakishvili's
high-profile visit was getting gas from Turkey. Gokce voiced
concerns we have heard before from the GOT that Georgia was
over-playing its fight with Russia, and so was now over-eager
in its all out courting of Turkey to replace Russia in a
range of areas, including gas. He said in previous meetings
that GOG officials had trumpeted Russian threats to Georgia
as so dire to the region that they must be countered no
matter the cost. Officials had even suggested that Georgia
might not be able to guarantee the security of BTC and BTE

ANKARA 00006763 002 OF 002


pipelines. Noting that the GOT had counseled restraint and
dialogue, Gokce said that Georgian officials had a calmer
tone on this visit, but were aiming for longer term gas
needs, including unclear compensation to Turkey from future
Georgian electricity exports.


5. (C) COMMENT: It is unclear if the trilateral meeting on
gas will come to pass before the new year and whether it will
be fruitful. Turkish officials are exasperated with
Georgia's frantic calls for help, and cynically observe that
Georgia just wants Turkey's gas cheap. The issue of Turkey's
compensation still looks like a deal breaker, without serious
intercession from Azerbaijan. It is unclear how delays in
Shah Deniz deliveries and reported deals by Georgian
companies with Gazprom will affect the situation. The
Georgian DCM characterized the deals with Gazprom as
short-term contracts by Russian companies.

Visit Ankara's Classified Web Site at
http://www.state.sgov.gov/p/eur/ankara/

WILSON